Internet Cash: The Drudge Report

We often cover businesses who use the internet to market or sell their products. In fact, most businesses need to have some sort of online presence in today’s world. But there’s a big difference between a site like Amazon and a blog or a Twitter feed.

Millions of people are making money on the internet–and millions more are trying to make money selling books and guides about making millions on the internet–but it’s an area that seems to mystify and fascinate a whole lot of people. In this new series, I’ll be taking a look at some of the many ways entrepreneurs and industrious young (and old) capitalists are making money using nothing more than a keyboard and mouse.

How do you get your news? Some people go to CNN. Others wait for late-night TV. Some don’t even seek out the news anymore. It just comes to them via social networking. “I really don’t even have to go to the news anymore. I find out what’s happening in culture and abroad from links people post on Facebook,” one 21-year old Los Angeles resident recently confessed to me. It’s clear that the world of content and news distribution is a shifting landscape, which helps explain why so many people go to blogs and news aggregates to get their news. For some, a service like Google News means the difference between reading one newspaper and reading the day’s highlights from all of the world’s top newspapers. Likewise, bloggers take all of the days news, usually in a specific field of interest, and distill it, comment on it, and link to it for their readers.

Matt Drudge, founder of the Drudge Report, purportedly dislikes the classification of his site as “a blog,” but the Drudge Report and some of today’s blogs have more than a little in common. Sure, there’s a big difference between Perez Hilton and Matt Drudge, but they both serve similar functions. While they may have “tipsters” calling in “scoops” from time to time, neither Perez Hilton or The Drudge Report are usually reporting the news. Instead, they’re reporting on the news. Perez Hilton dishes gossip and takes pictures of celebrities to town with Windows Paint. Matt Drudge finds interesting news stories from around the web and links to them with eye-catching headlines. The Drudge Report came up when “weblogging” was in its infancy, and if not a blog by strict definition, it is still of the same family.

So is there money to be made in simply linking to the news? Well it’s certainly making Drudge a pretty penny, and it has also given him remarkable power in the world of internet news traffic.

The Drudge Report has been going strong for fourteen years and, surprisingly, is practically unchanged in design from its earliest days–is still one of the most powerful sites on the internet.

The New York Times reported yesterday that recent findings suggest “that Mr. Drudge, once thought of as a hothouse flower of the Lewinsky scandal, is now more powerful in driving news than the half-billion folks on Facebook.

“With no video, no search optimization, no slide shows, and a design that is right out of mid-’90s manual on HTML, The Drudge Report provides 7 percent of the inbound referrals to the top news sites in the country.”

Compare that to Facebook, which accounts for 3.3 percent of inbound traffic to the major news sources. But how does he make money off of it?

Well, with the kind of traffic Drudge is getting it may not surprise you that all of the income is from the scant advertising on his site. There’s a banner ad at the top of the Drudge Report, and then a few other little ads elsewhere on the page. That’s it.

According to a 2003 article in Business 2.0, those few ads net the Drudge Report around $3,500 a day, $5,000 on a good day. And the site has only gotten more popular in the years since that estimate. The Drudge Report, the article notes, is run on a shoestring budget and “Drudge’s is a two-person operation (although he never mentions his right-hand man); that means it makes $400,000 per employee. And he never has to leave the comfort of his Miami condo.” This compared to The New York Times site, which in the same year was averaging $35,000 in profits for each one of its 237 full-time employees.

Handling of ad sales on the Drudge Report is done by a company called Intermarkets. Back in 2003, advertisers were paying up to $2 per thousand impressions, a pretty decent rate, especially when you have a lot more than a thousand visitors per day. Ad space on the Drudge Report sells out months in advance.

The Business 2.0 article also quotes Harry Knowles, founder of the similarly sparse entertainment news site, Ain’t It Cool News, as saying, “Matt and I spent hours talking about how slow the big boys were in breaking news… I remember Matt saying to me, ‘The Internet is going to be the thing that knocks off CNN.’” And, while CNN has survived this thing they call the Internet, could part of their success be due to Mr. Drudge himself linking to their news and website?

The Drudge Report, of course, is a rarity. But the power and influence of this independent operation shows what can be done with an all-internet business, the shuffling of information, if you will. The Drudge Report operates almost solely on reputation, which is great, if you have one.

Smaller bloggers and aggregates, on the other hand, have to count as much on Search Engines as they do on loyal readers. In my next piece, I’ll look at everyday people who are using just an internet connection and access to the same information as everyone else to make a living. They may not all be lounging on the beaches of Miami with Drudge, but they’re also not sitting in a cubicle, waiting for the clock to run its course.